We never heard so often about blockchain as we do nowadays. But is it only a powerful tool for Fintech companies? Or is it just a buzzword for millennials? Today we’ll explore this technology advantages, its wide variety of applications and shed light on the future of blockchain.
What is blockchain technology, anyway?
In a nutshell, Blockchain technology is a transparent and decentralized database. Everything is registered and can be consulted by everyone. A blockchain database records every token transaction, whether this token represents cryptocurrency (bitcoin or ethereum, for example) or a number of votes in an election.
Once a record is created in blockchain technology, it can’t be altered. This means that it can’t be erased or modified.
As the name implies, blockchain technology is a chain of information blocks, which grows as new blocks of information are created. For example, in bitcoin, a block is created every 10 minutes, and it contains every transaction during that time frame.
Each block is connected to the next and previous blocks, and so on. If a computer in this network tries to make a change on this chain, the remaining computers assume that change shouldn’t be done and discard it.
As it is a distributed and decentralized system, it is in thousands of computers around the world. When an update is made on a block, every computer on the network is automatically notified of this change.
What are the advantages of blockchain technology?
At this point, you can probably start to imagine the potential of this technology. Let’s go through the key benefits that it can bring to the table.
The supply chain of information blocks makes it irrefrangible. To compromise the data, you’d have to be in control of at least half of the computers in the network.
Otherwise, the change will not be accepted. Since data on blockchain can’t be erased nor altered, you can be sure that every change that is made is legitimate and reliable.
Availability is another great pro of blockchain technology. The distributed structure helps the technology to keep working, even if now and then a computer disconnects from the network. When the missing node comes back to the network, they are immediately updated.
Another important aspect is its transparency. Every transaction is public, which means that every node gets access to it. Cryptography mechanisms provide anonymity to users, if so desired.
However, these same systems allow you to vinculate identities, if necessary. This reinforces the feature that only legitimate users are collaborating on the transaction.
Implementing blockchain infrastructure can be cheaper compared to implementing centralized computational systems. Obviously these costs can vary according to your vertical, but in general a distributed model implies sharing processing and storing costs.
The future of blockchain. Is it for me?
We already know that blockchain technology is a fundamental part of bitcoin. However, its structure can be applied in a great variety of verticals. There are some early adoptions in a number of countries, which we would like to bring it to the conversation:
There are a number of banks and financial companies interested in investing in blockchain structures. It has been made clear that this technology can be used for payment transactions and bank transfers.
At least in an international context, blockchain transactions can help to leverage the speed of these processes, while reinforcing trust and reliability.
Financial institutions normally work during business hours, five days a week. If you try to deposit a check, for example, on Friday 6 p.m., you’ll have to wait until Monday to see if that money actually hit your account. Even on any other working days, sometimes we have to wait 2-3 business days due to the great volume of transactions that banks need to assimilate.
Like New York, blockchain never sleeps. Thanks to its 10-minute update cycle, any transaction will be almost immediate, any day of the week. This reduces hassle for both banks and their users.
Health businesses can see great added value on blockchain, since it can securely store their patient’s medical records. When a medical record is generated and signed, it can be written to the blockchain.
This process provides patients the proof and confidence that the record can not be erased or changed. Of course, this data will only be accessible via a password, reassuring that the patients maintain their privacy.
If your company deals on a regular basis with property and intellectual records, you’ll agree with us when we say that this process is sometimes inefficient and full of human errors.
Let’s not even get started on the struggles of delivering any documentation to government authorities. When considering a property dispute, claims to the property must be made to the local or public database. However, this must be done by scheduling an appointment – rarely as soon as we need it to be.
Not only does this process cost money, but it also costs a great deal of time, counting with the occasional inaccuracy errors that can make tracking a property quite tricky.
Investing on blockchain technology, on the other hand, has a great potential to eliminate the need for literally scanning documents, for example. If a property record is registered in a blockchain structure, owners can trust that the information is accurate and constantly updated.
Whether it is in food or fashion, retail is THE vertical where blockchain has major implications in building brand trust and confidence. According to Forbes, the food industry can be the best ally for blockchain investment.
Aiming for a more and more concerned consumer generation about a product’s origin and how it has been produced, blockchain can help trace the path and safety of food throughout the farm-to-user journey. The same can happen to the fashion industry, when considering sustainable approaches and fabric selection.
If you’re in the retail business, blockchain investment can be great, considering online shopping has been so quickly on the rise since 2020.
By having all product stock and management in a blockchain database, stock inventories and management can be easily kept up to date, without creating miscommunication between the consumer and the online shop.
In 2016, IBM associated with Walmart in order to put retail and blockchain on the same page. The Food Trust blockchain emerged as the solution for tracking food products.
More recently, IBM has introduced a trade solution for freight management known as Tradelens, in 2018, in partnership with Maersk.
Nestle is also running a project based on blockchain for tracking the origin of baby milk and coffee. Amazon has been able to leverage blockchain solutions for controlling the supply of wine.
A smart contract is a computer program that can be built into the blockchain in order to articulate, check or negotiate a contract agreement. According to IBM, smart contracts operate under a set of conditions that users agree to. When those conditions are met, the terms of the agreement are automatically carried out.
If you work on a daily basis with outsourcing contracts, or even with supplying contracts, this can be a great solution for your business. Both parts are bound to the rules agreed on that contract and can not make changes to it.
Since data in a blockchain database can not be changed or erased without the consent of all nodes involved, governments can harness great value in investing in blockchain technology.
Blockchain can help public institutions when managing public resources, accelerate audit processes and avoid, for example, electoral frauds or recounts.
It can also help fighting fake documents and identities, which is great when it comes to digital contracts or property records.
In the context of a pandemic, Japan’s Finance Minister recently said that blockchain technology can help the fight against COVID-19. For example, with coldchain vaccine tracking for example.
Non Fungible Tokens (NFT)
As the word indicates, Non Fungible suggests that a token (a determined piece of information on the blockchain) can’t be replaced. Adding to it, and according to blockchain mindset, the ownership is tied and verified to a unique transaction that you can actually see on the blockchain (most easily through platforms like Opensea).
There are some successes across industries, like gaming or pieces of art. However, there are currently some examples in the retail industry, like fashion. In 2019, Nike launched the CryptoKicks.
NFTs are the ultimate way to flaunt status because not only are they super expensive right now like hype sneakers are, they’re made in limited quantities and you can flex them to the whole public in a more efficient way than posting pictures on social media.
And the best and most important part, they can’t be faked, which may be a selling point for those on the fence about starting a NFT sneaker collection.
Blockchain challenges for further debate
Although it is a promising and emerging technology, blockchain can not be seen as a magical solution. There are still some challenges regarding its development, which we would like to leave for your consideration.
One of them is data management and processing. Blockchain technology involves cryptographic procedures, a system in which there’s a lot to handle, with a high chance of information overload.
Keeping the system up and running requires a great budget for computers which support this type of operations. It is required as well a network equipment that can easily manage a great amount of data.
Depending on how each blockchain is formed, response time of certain operations can be quite long, which can create significant bottlenecks if the demand suddenly increases.
This is why it is important to carefully study whether blockchain technology is the best solution for you. Concerning GDPR, having a blockchain structure can be quite risky, since users can’t erase their records.
Nevertheless, the potential outcome of investing in this technology surpasses its costs and initial challenges. Considering the safe environment that it can create, as well as automatic updates that depend less on human interaction, there’s much more to blockchain than cryptocurrency investment.